IN RE INTERPOOL

The opinion of the court was delivered by: STANLEY CHESLER, Magistrate Judge

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] OPINION

This matter comes before the Court on Defendants' Interpool,
Inc., Raoul J. Witteveen, Mitchell I. Gordon, William Geoghan,
and Martin Tuchman (collectively, the "Defendants") motions to
dismiss Plaintiffs' consolidated amended class action complaint
(the "complaint") [docket numbers 25, 21, 26, 28, and 31,
respectively]. The Court, having considered the papers submitted
by the parties, for the reasons set forth below and for good
cause shown, will grant Defendants' motions to dismiss.

BACKGROUND:

In light of the fact that Defendants' motions are made pursuant
to Federal Rule of Civil Procedure 12(b)(6), the Court "must
accept as true the facts as alleged in the [complaint] and any
reasonable inferences that can be drawn therefrom." In re
Campbell Soup Co. Secs. Litig., 145 F. Supp. 2d 574, 579 (D.N.J.
2001) (citing Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996).
The following facts gleaned from Plaintiffs' complaint*fn1
and opposition brief*fn2 therefore do not represent findings of fact by the Court.

I. Background on Interpool:

Founded in 1968, Interpool is now one of the world's leading
suppliers of equipment and services to the transportation
industry and is primarily engaged in the leasing of containers
and chassis (i.e., trailers for transport). (See ¶ 33). The
Company primarily conducts this business through two
subsidiaries. The first subsidiary, Interpool Limited, engages in
the long-term leasing of freight containers. (See id.). The
second subsidiary, Trac Lease, Inc., leases chassis to shipping
lines, railroads and trucking firms and operates pools in the
United States that allow shippers to share and trade available
chassis.*fn3 (See id.). "In addition to the Company's
container and chassis leasing operations, during the Class Period
the Company also derived revenues from Interpool's computer
leasing segment." (Id.). Interpool became a publicly-owned
company in 1993, trading on the New York Stock Exchange under the
symbol "IPX."

In February 1998, Interpool entered into an "investment
banking" consulting agreement with Atlas Capital Partners, LLC
("Atlas Capital"), a private equity investment and consulting
firm. (See ¶¶ 18, 34). At the time, the President of Atlas
Capital was Defendant Mitchell I. Gordon. (See ¶ 18). Mr.
Gordon also served as a director of Interpool. (See id.).

In April 1998, just a few months after this deal was cut,
Interpool began to embark on a series of acquisitions that
greatly expanded the scope of the Company's operations and added
to the complexity of its financial reporting procedures and
controls. (See ¶ 34; see also ¶¶ 35-37) (describing the various complex acquisitions that Interpool made
starting in April 1998). For example, "Interpool acquired a 50%
common equity interest in Container Applications International,
Inc. (`CAI')," a company that "owns and leases its own fleet of
containers and also manages, for a fee, containers owned by
Interpool and other third parties." (¶ 35). Likewise, in "May
1999, the Company acquired a 51% interest in Personal Computer
Rentals, Inc. (`PCR'), a privately-held lessor of computers and
related equipment for approximately $6.7 million." (¶ 36).

II. Individual Defendants:

The individual Defendants who are alleged to have committed
fraud upon Interpool's investors include the following:

A. Martin Tuchman ("Tuchman"):

Mr. Tuchman was Interpool's Chairman of the Board of Directors
and Chief Executive Officer during the Class Period. (See ¶
16). He is Interpool Limited's Chairman of the Board of
Directors, Chief Executive Officer, director and co-founder.
(See id.). He was also Trac Lease's director since June 1987,
President from June 1987 through January 1994 and currently its
Chairman and Chief Executive Officer. (See id.).
Additionally, Tuchman has served as President and Chief Operating
Officer of Interpool since October 2003. (See ¶ 16).

B. Raoul J. Witteveen ("Witteveen"):

Mr. Witteveen was Interpool's President, Chief Operating
Officer and a director of the Company who also served as Chief
Financial Officer from 1993 to 2000. (See ¶ 17). He was
Interpool Limited's President, Chief Financial Officer and a
director since 1988 who also served as Chief Financial Officer from 1988 to 2000. (See id.). From
1982 to 1986, Witteveen served in a variety of management
capacities at Thyssen-Bornemisza N.V., the former parent of
Interpool Limited. (See ¶ 17). Additionally, he was Trac
Lease's co-founder and Chief Financial Officer, Vice President
and a director of Trac Lease since June 1987. (See id.).

C. Mitchell I. Gordon ("Gordon"):

Mr. Gordon was Interpool's director since 1998 and Chief
Financial Officer and Executive Vice President of the Company
since October 2000. (See ¶ 18).

Plaintiffs contend that the Defendants repeatedly made "untrue
statement[s] of a material fact" and omitted "material fact[s]
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading."
17 C.F.R. § 240.10b-5(b). (Pl. Opp. 7).

The allegedly false statements made by the Defendants that
allegedly artificially inflated Interpool stock in violation of
Rule 10b-5 can be categorized into three groups. First, the
Defendants allegedly repeatedly made false statements in
Interpool's annual Form 10-Ks and quarterly Form 10-Qs filed with
the SEC that contained the Company's financial
statements.*fn4 Second, the Defendants allegedly made false statements in press
releases that preceded the filing of these SEC Forms and
announced the Company's quarterly and annual financial results
that would be filed in the SEC Forms. Third, CEO Tuchman,
speaking on behalf of himself and the Company, allegedly
repeatedly made false statements in public conferences related to
the announcement of these results. (Pl. Opp. 8).

IV. Allegedly False Statements Made by Defendants:

At the beginning of the Class Period, the Defendants reported
for fiscal year 1998 revenues of $182.3 million with a net income
for Interpool of $37.6 million, or $1.31 of earnings per share.
(¶ 40). In addition, the Company's total stockholders' equity was
reported to be $283.2 million. (Id.). Finally, as part of the
Company's assets, "Interpool reported direct financing leases of
$356.4 million and leasing equipment net of depreciation and
amortization of $736.1 million, which together represented more
than 80% of the Company's reported assets at December 31, 1998."
(Id.).

Plaintiffs allege that all of these financial numbers were
false and that the Defendants knew or, at the very least,
recklessly ignored that fact. Plaintiffs contend that these
financial numbers constitute fraud for the following reasons, as
explained in paragraph 42 of the Complaint: (a) Interpool lacked adequate internal controls and
was therefore unable to ascertain the true financial
condition of the Company;

(b) certain leases that had been accounted for as
operating leases should have been accounted for as
direct finance leases. In addition, revenue related
to leases classified as finance leases had been
materially understated;

(c) the Company lacked any documentation for an
interest rate swap designed to hedge interest rate
fluctuations for a chassis securitization facility
and was therefore required to treat changes in the
fair market of the swap as gains or losses in the
Company's income statement, as a result of
Interpool's improper hedge accounting for the swap
the Company's earnings were materially overstated;

(d) that reserves established for residual guaranties
under certain financings were materially
overstated;

(e) income earned on intercompany transactions with
Interpool's subsidiary CAI had not been eliminated
resulting in a material overstatement of the
Company's earnings;

(h) the net book value of certain containers,
acquired from an investment partnership in December
1996, was materially overstated;

(i) the earnings were materially misstated relating
to certain intercompany accounts with foreign
subsidiaries that had not been reconciled at December
31, 2000 and 2001;

(j) the earnings were materially overstated based
on improper accounting for an insurance claim for a
defaulted lease, which also materially overstated
receivables due from an insurance carrier and,
correspondingly, reduced lease revenues and other
income for certain amounts billable under the lease
contract that are not probable of collection;

(k) that Defendants omitted other material
adjustments, consisting primarily of changes in
accruals and estimates as well as reclassification of
previously recorded entries to proper periods.

"Put simply," Plaintiffs contend that "the financial statements
published by Interpool were not prepared in accordance with GAAP
and were therefore materially false and misleading." (Pl. Opp.
13; ¶ 42(l); see also ¶¶ 94-134 (detailing how the financial
statements violated GAAP)).

Plaintiffs further allege that during the Class Period,
Defendants intentionally or recklessly made two additional sets
of false statements that also violated Rule 10b-5. First, on
August 9, 2000, Interpool filed its report with SEC on Form 10-Q
for the second quarter of 2000. (See ¶ 51). In this SEC form,
the Defendants stated that Interpool was adopting of Statement of
Financial Accounting Standards 133 ("SFAS 133"), which is
entitled "Accounting for Derivative Financial Instruments and
Hedging Activities." Among other things, SFAS 133 requires a
company to "formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting." (¶
51) (emphasis removed). Plaintiffs contend, however, that "the
documentation of the hedging relationship [entered into by
Interpool] did not exist as required by SFAS 133 and, therefore,
the swap [that was recorded] should have been accounted for as a
speculative contract when the Company adopted SFAS 133 in January
2001." (¶ 52(a)); (see also ¶ 38) (describing the hedging
relationship and swap that Interpool entered into). Plaintiffs
allege that from this time forward, all of Interpool's statements
regarding its compliance with GAAP and its calculation of the
Company's assets were false and misleading. (See ¶¶ 56, 60, 64,
72, 76, 80, 85).

Second, in September 2001, "the Company announced its intention
to exit the computer leasing business and commenced a liquidation
plan which included a purported `sale' of PCR to an investor
group comprised primarily of PCR management." (¶ 36; see also
¶¶ 69-70). Interpool had acquired a 51% interest in PCR two and
half years earlier in May of 1999  one of the primary
acquisitions that Interpool had made in its expansion that began
a year earlier. (See ¶ 36). Following the announcement of its
sale of PCR in September 2001, "the Company began reporting its
computer segment results as `discontinued' operations." (Id.).
However, the Defendants were prohibited from reporting the sale
of PCR in such a manner because "certain directors and officers,
including Defendants Tuchman and Witteveen had guaranteed, or
intended to guarantee, certain of PCR's lines of credit." (¶ 76;
see also ¶ 121) (describing SFAS No. 144 and the SEC's Staff
Accounting Bulletin Topic 5E which provides guidance on when a
company should report the sale of such assets).

Thus, as management of Interpool later admitted in its
restatement, "the requirements for discontinued operation
accounting treatment were not satisfied." (¶ 3). As a result,
"the Company's true operating results were [allegedly] materially
misrepresented by millions of dollars." (¶ 36). Plaintiffs claim
that from this time forward, all of Interpool's statements
regarding its compliance with GAAP and its calculation of
operating results (and hence its net income) were false and
misleading. (See ¶¶ 76, 80, 85).

Plaintiffs contend that the fact that all of the statements
detailed in the Complaint (see ¶¶ 40-85) were untrue is not in
dispute. (See Pl. Opp. 15). GAAP only requires a restatement
when information in previously provided financial statements is
both inaccurate and material. Accounting Principles Board ("APB") Opinion No. 20 specifically
states that a restatement is proper if based on "mathematical
mistakes, mistakes in the application of accounting principles,
or oversight or misuse of facts that existed at the time the
financial statements were prepared." APB 20; (¶ 13). A
restatement is specifically not proper for "new information or
subsequent developments" or for "better insight or improved
judgment." (Id.). Once GAAP was applied, Interpool was forced
to issue a restatement of its financial results. Plaintiffs
allege that the full extent to which the financial statements had
been false was finally revealed on January 9, 2004. (See ¶ 8).

Plaintiffs state that the aggregate effect, according to
Interpool, of the restatement of the Company's historical
financial statements, was the following:

(1) net income was materially overstated by $14.4
million or 51% for the year ended December 31, 2001;

(2) net income was materially overstated during the
quarters ended March 31, 2002, June 30, 2002 and
September 30, 2002, by more than 72%, 45% and 15%,
respectively;

(3) net income was materially understated by $.2
million for the year ended December 31, 2000;

(4) retained earnings was materially overstated at
January 1, 2000 by $2.0 million;

(5) stockholders' equity was materially overstated by
$11.2 million and $1.7 million for the years ended
December 31, 2001 and 2000, respectively;

(6) net investment in direct financing leases was
materially understated by $46.1 million and $61.8
million at December 31, 2001 and December 31, 2000,
respectively;

(7) leasing equipment, net was materially overstated
by $37.5 million, and $24.7 million at December 31,
2001 and December 31, 2000, respectively.

(Pl. Opp. 16-17); (¶¶ 8, 109, 110, 120).

Plaintiffs contend that all of the above clearly demonstrates
that the financial statements and accompanying statements and
press releases were false and misleading when issued, and that the revelation of this misinformation had a materially
adverse impact Interpool's investors. (Pl. Opp. 17; see also ¶
9) ("In total, the price of Interpool common stock alone has
fallen almost 50% from its Class Period trading high.").
Plaintiffs further contend that these events could not have
transpired without the knowing or reckless participation of the
Defendants.

PROCEDURAL HISTORY:

Plaintiffs filed a Consolidated Amended Class Action Complaint
on or about January 23, 2004 in which they allege certain
securities laws violations. Specifically, the First Claim alleges
that all Defendants violated Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder. (¶¶ 146-57). The Second
Claim alleges that the Individual Defendants violated Section
20(a) of the Exchange Act. (¶¶ 158-61). Defendants filed separate
motions to dismiss the complaint on or about November 22, 2004,
and November 23, 2004.*fn5

DISCUSSION:

I. Applicable Standards:

A. Federal Rule of Civil Procedure 12(b)(6): Federal Rule of Civil Procedure 12(b)(6) states that a court
may dismiss a complaint "for failure to state a claim upon which
relief can be granted." A claim will be dismissed only if "it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief." In
re Rockefeller Ctr. Props., Inc. Secs. Litig., 311 F.3d 198, 215
(3d Cir. 2002) (citing Conley v. Gibson, 355 U.S. 41, 45-46
(1957)). The question thus becomes whether the plaintiff can
prove any set of facts consistent with his or her allegations
that will entitle him or her to relief and not whether that
person ultimately will prevail. In re Cendant Corp. Secs.
Litig., 76 F. Supp. 2d 531, 534 (D.N.J. 1999). Although a court
will treat all well-pleaded allegations in the complaint as true,
courts "are not required to credit bald assertions or legal
conclusions," nor will the presumption of truthfulness apply to
"legal conclusions draped in the guise of factual allegations."
Jones v. Intelli-Check, Inc., 274 F. Supp. 2d 615, 625 (D.N.J.
2003) (citations omitted).

Moreover, in deciding a 12(b)(6) motion, courts "may not
consider matters extraneous to the complaint." Id. (citing In
re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997)). The Third Circuit has noted an exception to the
general rule to permit that a "document integral to or explicitly
relied upon in the complaint" may be considered "without
converting the [Rule 12(b)(6)] motion into one for summary
judgment." Burlington Coat Factory, 114 F.3d at 1426 (quotation
omitted); see also In re Donald Trump Casino Sec. Litig.,
7 F.3d 357, 368 n. 9 (3d Cir. 1993) (noting that courts may
consider documents attached to defendant's motion to dismiss "if
the plaintiff's claims are based on the documents[s]"). "The
rationale underlying this exception is that the primary problem
raised by considering documents outside the complaint  lack of
notice to the plaintiff  is dissipated where [the] plaintiff has actual notice and has relied upon the documents in framing the
complaint." Jones, 274 F. Supp. 2d at 625-26. Similarly, courts
are free to consider matters of public record that are referenced
in the complaint. Id.

B. Section 10(b) of the Exchange Act and Rule 10b-5:

Section 10(b) of the Exchange Act prohibits the "use or
employ[ment], in connection with the purchase or sale of any
security . . . [of] any manipulative or deceptive device or
contrivance in contravention of such rules and regulations as the
Commission may prescribe." 15 U.S.C. § 78j(b). Further, Rule
10b-5 renders illegal the making of "any untrue statement of a
material fact or to omit to state a material fact necessary in
order to make the statements made, in the light of the
circumstances under which they were made, not misleading . . . in
connection with the purchaser or sale of any security."
17 C.F.R. § 240.10b-5(b). Section 10(b) and Rule 10b-5 therefore require
that a plaintiff must "plead that (1) the defendant made a
[misstatement] or omission of material fact; (2) with scienter;
(3) in connection with the purchase or sale of securities; (4)
upon which the plaintiff relied; and (5) the plaintiff's reliance
was the proximate cause of its injury." In re Campbell Soup Sec.
Litig., 145 F. Supp. 2d 574, 583 (D.N.J. 2001) (citing EP
MedSystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 871 (3d Cir.
2000)).

Materiality of a fact is proved upon a demonstration that there
is a "substantial likelihood that a reasonable investor would
have viewed it as having significantly altered the total mix of
information available to the public." Jones,
274 F. Supp. 2d at 627 (citing Shapiro v. UJB Fin. Corp., 964 F.2d 272, 280 n. 11
(3d Cir. 1992)). Although "[m]ateriality is a mixed question of
law and fact," Jones, 274 F. Supp. 2d at 627, the Third Circuit
has adopted a specific analysis for determining materiality within the context of an
efficient securities market. That analysis turns on the theory
that in an efficient market, "information important to reasonable
investors . . . is immediately incorporated into the stock
price." Burlington Coat Factory, 114 F.3d at 1425. Accordingly,
when a stock is traded in an efficient market, the materiality of
the disclosed information may be calculated by viewing the
movement of the stock's price immediately after the disclosure.
Id.

In an action alleging misrepresentation or omission of material
facts, 10b-5 liability will not attach unless a plaintiff can
demonstrate that the defendant had a duty to disclose. Thus,
silence, absent a duty to disclose, is not misleading under Rule
10b-5. Basic, Inc. v. Levinson, 485 U.S. 224, 239 n. 17 (1988);
In re Time Warner, Inc. Secs. Litig., 9 F.3d 259, 267 (2d Cir.
1993) ("a corporation is not required to disclose a fact merely
because a reasonable investor would very much like to know that
fact"). Once disclosure is made, however, an obligation to make
the disclosure accurate will attach. Within the context of
Section 10(b) and Rule 10b-5 actions, "[a] statement is false or
misleading if it is factually inaccurate, or additional
information is required to clarify it." In re Nice Sys., Ltd.
Sec. Litig., 135 F. Supp. 2d 551, 573 (D.N.J. 2001).

C. Federal Rule of Civil Procedure 9(b):

Claims brought pursuant to Section 10(b) and Rule 10b-5,
i.e., fraud claims, must comply with the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b). See
Burlington Coat Factory, 114 F.3d at 1417. Rule 9(b) provides
that "[i]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity." Fed.R.Civ.P. 9(b). As one Court has observed, "[t]he purpose
of the heightened pleading requirement is to give defendants
notice of the claims against them, to provide an increased
measure of protection for their reputations, and to reduce the
number of frivolous suits brought solely to extract settlements."
In re Party City Sec. Litig., 147 F. Supp. 2d 282, 298 (D.N.J.
2001) (quotation omitted). Accordingly, plaintiffs alleging
violations of Section 10(b) and Rule 10b-5 must plead those
claims with "particularity." In that respect, "boilerplate and
conclusory allegations," without specific facts in support of
those allegations, "will not suffice." Burlington Coat Factory,
114 F.3d at 1418.

D. Private Securities Litigation Reform Act:

In addition to the heightened requirements of Rule 9(b),
plaintiffs seeking redress pursuant to federal securities laws
must meet the pleading requirements set forth in the Private
Securities Litigation Reform Act of 1995 ("PSLRA"). See
15 U.S.C. § 78u-4. The burden imposed by the PSLRA has been well
articulated as follows:

[T]he PSLRA requires a complaint, which asserts a
Section 10(b) claim, set forth "each statement
alleged to have been misleading, the reason or
reasons why the statement is misleading, and if an
allegation regarding the statement or omission is
made on information or belief, the complaint shall
state with particularity all facts on which that
belief is formed."

In respect of allegations of scienter, the PSLRA requires that
the complaint must "state with particularity facts giving rise to
a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2); see also
Oran v. Stafford, 226 F.3d 275, 288 (3d Cir. 2000) (same). A
complaint that fails to meet any of the above pleading
requirements must be dismissed. 15 U.S.C. 78u-4(b)(3)(A).

E. Scienter and the PSLRA:

As noted above, the procedural requirements of the PSLRA
dictate that a plaintiff's complaint must "state with
particularity facts giving rise to a strong inference that
[defendants] acted with the required state of mind to survive a
motion to dismiss." See 15 U.S.C. § 78u-4(b)(2); See also
Oran, 226 F.3d at 288 (same). Moreover, "[w]hile under Rule
12(b)(6) all inferences must be drawn in plaintiffs' favor,
inference of scienter do not survive if they are merely
reasonable. . . . Rather, inferences of scienter survive a motion
to dismiss only if they are both reasonable and `strong'
inferences." In re Alpharma Inc. Sec. Litig., 372 F.3d 137, 150
(3d Cir. 2004) (internal citation omitted). With respect to the
nature of the proofs required to successfully plead scienter, the
Third Circuit has held that scienter may be demonstrated by (1)
"alleging facts establishing a motive and an opportunity to
commit fraud," or (2) "by setting forth facts that constitute
circumstantial evidence of either reckless or conscious
behavior." In re Advanta Corp., 180 F.3d 525, 534-35 (3d Cir.
1999) (internal citation omitted). "A reckless statement is a
material misrepresentation or omission `involving not merely
simple, or even excusable negligence, but an extreme departure
from the standards of ordinary care, and which presents a danger
of misleading buyers or sellers that is either known to the
defendant or is so obvious that the actor must have been aware of
it.'" GSC Partners CDO Fund v. Washington, 368 F.3d 228, 239
(3d Cir. 2004) (quoting Advanta, 180 F.3d at 535). Likewise,
the Third Circuit has noted that "conscious behavior" includes "intentional
fraud or other deliberate illegal behavior." Advanta,
180 F.3d at 535.

As discussed above, the Third Circuit law is that scienter may
be demonstrated by either (1) "alleging facts establishing a
motive and an opportunity to commit fraud," or (2) "setting forth
facts that constitute circumstantial evidence of either reckless
or conscious behavior." Advanta, 180 F.3d at 534-35 (citation
and quotation omitted). Therefore, the Court will now analyze
whether Plaintiffs have pled allegations sufficient to meet
either of these alternative requirements.

1. Motive and Opportunity:

As the Third Circuit clarified in Advanta, "[m]otive and
opportunity, like all other allegations of scienter (intentional,
conscious, or reckless behavior), must now be supported by facts
stated `with particularity' and must give rise to a `strong
inference' of scienter." 180 F.3d at 535 (quoting
15 U.S.C.A. § 78u-4(b)(2)). Therefore, under the PSLRA, "catch-all allegations
that defendants stood to benefit from wrongdoing and had the
opportunity to implement a fraudulent scheme are no longer sufficient, because they do not
state facts with particularity or give rise to a strong inference
of scienter." Id. Moreover, "[m]otives that are generally
possessed by most corporate directors and officers do not
suffice." GSC Partners CDO Fund v. Washington, 368 F.3d 228,
237 (3d Cir. 2004).

A showing of motive requires allegations that the individual
corporate defendants stood to gain in "concrete and personal"
ways from one or more of the alleged misleading statements or
wrongful omissions. Wilson v. Burnstock, 195 F. Supp. 2d 619,
633 (D.N.J. 2002). A showing of opportunity requires a showing
that there were "means and likely prospect of achieving such
concrete benefits by the means alleged." Wilson,
195 F. Supp. 2d at 633 (internal citations omitted). As Plaintiffs correctly
point out, "[i]n this case, defendants' opportunity to commit
fraud is clear; each defendant was a senior corporate officer who
controlled public dissemination of information about the
company." (Pl. Opp. 39) (quoting In re Unisys Corp. Sec.
Litig., No. Civ. A 00-1849, 2000 WL 1367951, at *6 (E.D. Pa.
Sept. 21, 2000)). See also San Leandro Emergency Medical Group
Profit Sharing Plan v. Phillip Morris Companies, Inc.,
75 F.3d 801, 813 (2d Cir. 1996) (finding "no doubt" that defendants had
the opportunity to manipulate stock price as they held the
highest positions of authority and power in the company).
Defendants do not contest the assertion that by virtue of their
positions in the company they indeed had an opportunity to
commit the alleged fraud. The more difficult issue, however, is
whether the complaint adequately alleges that Defendants had a
motive to commit the alleged fraud.

Plaintiffs, in their opposition brief, allege the following
bases of motivation for Defendants to commit the alleged fraud: Motivation is equally clear: "Defendants were further
motivated to report Interpool's false and misleading
financials so that Interpool could acquire the North
American intermodal division of Transamerica Leasing,
Inc., a subsidiary of Transamerica Finance
Corporation and AEGON N.V. (NYSE: AGE), based in
Purchase, New York for $675 million in cash." ¶ 140.
"Interpool needed to secure credit facilities, which
it did during the Class Period. For example, in 2002,
the Company obtained a $540 million asset-backed
financing facility." ¶ 141. Similarly, Defendants
were motivated to artificially inflate their
financial number [sic] "given the importance of
Interpool's cash flow on its debt rating." ¶ 110;
see also ¶ 111 (explaining Interpool's motivation
to release artificially inflated numbers related to
cash flow). "Lastly, Defendants were motivated to
perpetrate this fraudulent scheme in order to
complete numerous offerings." ¶ 142.

(Pl. Opp. 39-40).

In essence then, Defendants' alleged motivations were the
following: (1) to acquire Transamerica Leasing, Inc. for $675
million in cash; (2) to secure credit facilities; (3) to
artificially inflate numbers related to cash flow on its debt
rating; and (4) to complete numerous offerings. The Court will
now address each of these in turn.

Plaintiffs allege that Defendants were motivated to "report
Interpool's false and misleading financials so that Interpool
could acquire the North American intermodal division of
Transamerica Leasing, Inc., a subsidiary of Transamerica Finance
Corporation and AEGON N.V. (NYSE: AGE), based in Purchase, New
York for $675 million in cash." (Pl. Opp. 39) (citing ¶ 140).
Courts have found sufficiently alleged motive to mislead
investors by artificially inflating the company stock price where
the acquisitions were at least partially funded by the company
stock. See, e.g., In re: ATI Technologies,
216 F. Supp. 2d 418, 438 (E.D.Pa. 2002) (finding sufficiently alleged motive and
opportunity to mislead where acquisition of company for $453
million was payable only in company stock); Marra v. Tel-Save
Holdings, Inc., 1999 WL 317103 (E.D.Pa. 1999) ("Because
plaintiffs have identified an acquisition that took place during the class period and was funded with a combination of
Tel-Save's stock and cash, a strong inference of fraudulent
intent is possible"). Courts have even found motive and
opportunity to be sufficiently alleged even where the acquisition
was not funded by company stock, but where plaintiffs
specifically identified how the company achieved a concrete
benefit by maintaining stock prices until the acquisition was
complete. See In re AT&T Corp. Sec. Litig., 2002 WL 31190863,
*26 (D.N.J. Jan. 30, 2002) (finding sufficient motive and
opportunity because the plaintiff established a concrete benefit
to AT&T in avoiding the extra cash payment to complete the
acquisition and showed how this was achieved by maintaining stock
prices). Here, Plaintiffs have merely pled that Interpool was
motivated to falsify its financials in order acquire the North
American intermodal division of Transamerica Leasing for $675
million in cash. (¶ 47). Notably, Plaintiff does not describe how
maintaining a high stock price during the acquisition enabled
Interpool to achieve a concrete benefit vis a vis the acquisition
negotiations. Id. None of the cases cited by Plaintiff stand
for the proposition that a defendant corporation's cash-based
acquisition made during the class period, without more, may state
a sufficient motive and opportunity to raise a strong inference
of scienter.*fn6 Therefore, Plaintiffs have not adequately
pled that Interpool's acquisition of the North American
intermodal division of Transamerica Leasing, Inc. establishes a
strong inference of scienter.

Plaintiffs' next allegations of motive are that "Interpool
needed to secure credit facilities, which it did during the Class Period. For example, in 2002, the
Company obtained a $540 million asset-backed financing facility."
¶ 141. Similarly, Defendants were motivated to artificially
inflate their financial number [sic] "given the importance of
Interpool's cash flow on its debt rating." ¶ 110; see also ¶
111 (explaining Interpool's motivation to release artificially
inflated numbers related to cash flow). (Pl. Opp. 39-40).
However, as courts in this district have recognized, "a company's
desire to maintain a high bond or credit rating does not qualify
as sufficient motive for fraud . . . because if scienter could be
pleaded on that basis alone, virtually every company in the
United States that experiences a downturn in stock price could be
forced to defend securities fraud actions." Wilson,
195 F. Supp. 2d at 634. (internal citations omitted). Similarly, the
Second Circuit has determined that this is insufficient to plead
scienter. See, San Leandro Emerg. Med. Grp. Profit,
75 F.3d 801, 813-814 (2d Cir. 1996) ("We do not agree that a company's
desire to maintain a high bond or credit rating qualifies as a
sufficient motive for fraud"). Plaintiffs do not cite any cases
for the proposition that a strong inference of scienter may be
implied from a corporation's desire to secure credit facilities,
or to inflate its cash flow on its debt rating. Indeed, these
motives are the very sort that "are generally possessed by most
corporate directors and officers." Thus, Plaintiffs have not
adequately pled that these corporate motives establish a strong
inference of scienter.

Plaintiffs next contend that "Defendants were motivated to
perpetrate this fraudulent scheme in order to complete numerous
offerings." (Pl. Opp. 40) (citing ¶ 142). Plaintiffs cite to the
following specific examples:

[O]n November 18, 2002, Interpool was able to
complete its tender offer for its 65/8% Notes due
2003 for $33.1 million. On November 25, 2002,
Interpool completed its previously postponed
subscription rights offering of up to $27,361,250 of 9.25% Convertible Redeemable
Subordinated Debentures. Lastly, on February 11,
2003, Interpool completed an offering of $411.9
million of AAA rated asset-backed notes.

(Pl. Opp. 40 n. 29) (citing ¶ 142). Notably, however, Plaintiffs
do not attempt to explain how the individual corporate Defendants
stood to gain in "concrete and personal" ways from one or more of
the alleged misleading statements or wrongful omissions via any
of these offerings. See, Wilson, 195 F. Supp. 2d at 633.
Plaintiffs cite to the unpublished opinion of In re Resource Am.
Sec. Litig., No. CIV. 98-5446, 2000 WL 1053861, at *6 (E.D. Pa.
July 26, 2000) for its holding that a corporation's desire to
raise capital by means of a secondary public offering could give
rise to a "strong inference" of scienter. That court based its
holding on the finding that "the individual Defendants, as
officers and directors of the company, would also benefit from
the public and industry-wide perception of their successful
leadership." Id. This Court, however, does not believe that the
individual Defendants' ostensible desire to be perceived as
successful leaders is a "concrete and personal" one that is not
"generally possessed by most corporate directors and officers."
Cf. In re JP Morgan Chase Securities Litig.,
363 F. Supp. 2d 595, 619 (S.D.N.Y. 2005) ("the desire for the corporation to
appear profitable and . . . the desire to keep stock prices high
to increase officer compensation are insufficient motives,
whereas the desire to inflate stock prices while defendants sold
their own shares may support a viable claim.") (internal
citations omitted). Therefore, this Court finds that Plaintiffs
have not adequately pled that Interpool's numerous offerings
establish a strong inference of scienter.

Accordingly, the Court concludes that all of Plaintiffs'
allegations of "motive" are precisely the sort that are generally
possessed by most corporate directors and officers, and which are
continually found to be insufficient to plead a strong inference
of scienter. The Court recognizes that Plaintiffs do not allege any specific, personal
benefits that any of the individual Defendants might have sought
to obtain from the alleged fraud. Also, notably missing from
Plaintiffs' pleadings are any allegations of insider trading or
other insidious motivations typically, although not necessarily,
found in corporate fraud cases. Rather, the Court finds that
although Defendants indeed had the opportunity to use their
positions as heads of Interpool to commit fraud, Plaintiffs have
not properly alleged facts to show that Defendants had the motive
to do so. Opportunity without motive is patently insufficient to
pled a strong inference of scienter.

2. Circumstantial Evidence of Reckless or Conscious Behavior:

Plaintiffs recite several alleged facts that they claim "give
rise to a strong inference that the Defendants intentionally or
recklessly made the misstatements." (Pl. Opp. 29).

Indeed, "[w]here motive is not apparent, it is still possible
to plead scienter by identifying circumstances indicating
conscious [or reckless] behavior by the defendant, though the
strength of the circumstantial allegations must be
correspondingly greater." GSC Partners, 368 F.3d at 238
(internal citation omitted). Moreover, Plaintiffs must plead such
allegations of scienter with particularity. See
15 U.S.C. § 78u-4(b)(2). The allegations must be supported with the "who,
what, when, where and how" of the events at issue. GSC
Partners, 368 F.3d at 239 (quoting Burlington Coat Factory,
114 F.3d at 1422).

In the context of securities fraud, a reckless statement is one
representing "an extreme departure from the standards of ordinary
care, and which presents a danger of misleading buyers or sellers
that is either known to the defendant or is so obvious that the
actor must have been aware of it." Advanta 180 F.3d at 535 (quoting McLean v.
Alexander, 599 F. 2d 1190, 1197 (3d Cir. 1979)). "An egregious
refusal to see the obvious, or to investigate the doubtful, may
in some cases give rise to an inference . . . of recklessness."
Novak v. Kasaks, 216 F.3d 300, 308 (2d Cir. 2000) (internal
citations omitted) (ellipsis in original). Additionally,
securities fraud claims have sufficiently stated a claim based on
recklessness where plaintiff has specifically alleged that
Defendants had "knowledge of facts or access to information
contradicting their public statements" such that defendants knew
or should have known that they were misrepresenting material
facts related to the corporation. Novak, 216 F.3d at 308. At
the same time, however, corporate officials "need not present an
overly gloomy or cautious picture." Novak, 216 F.3d at 309
(citations omitted).

The PSLRA, however, establishes a safe harbor protecting
certain "forward-looking" statements from Rule 10b-5
liability.*fn7 15 U.S.C. § 78u-5. So long as the
forward-looking statement is accompanied by sufficient cautionary
language, the plaintiff must allege facts showing that the
defendant made the misstatement with actual knowledge that it was
false or misleading, rather than with mere recklessness.
15 U.S.C. § 78u-5; see also Advanta, 180 F.3d at 536. Neither
the bespeaks caution doctrine nor the Safe Harbor provisions of
the PSLRA protect defendants from liability if a statement was
knowingly false when made. Advanta, 180 F.3d at 536.; see
also In re Alliance Pharmaceutical Corp. Sec. Litig.,
279 F. Supp. 2d 171, 192 (S.D.N.Y. 2003) (citing In re Independent
Energy, 154 F. Supp. 2d 741, 756-57 (S.D.N.Y. 2001)). The safe harbor is inapplicable where, even though the
statement is forward-looking, the Defendant is in possession of
historical or current information which makes the statement
nevertheless misleading. Warnings are insufficient to insulate a
party who makes statements which even though forward-looking, are
known to be untrue. In re Regeneron Pharmaceutical Sec. Litig.,
1995 WL 228336 *5 (S.D.N.Y.); see also Alliance,
279 F. Supp. 2d at 192-93 (quoting In re Prudential Sec. Inc. Ltd.
Partnerships Litig., 930 F. Supp. 68, 72 (S.D.N.Y. 1996) ("The
doctrine . . . provides no protection to someone who warns his
hiking companion to walk slowly because there might be a ditch
ahead when he knows with near certainty that the Grand Canyon
lies one foot away")).

Here, the first allegation Plaintiffs point to is the "letter
prepared by Interpool's independent auditors, KPMG, in a [sic]
September 2002, summarizing some of the material misstatements
and problems that Interpool and the Individual Defendants failed
to disclose." (Id. at 32). Plaintiffs assert that the KMPG
letter is particularly significant in that it states the
following:

Interpool had "significant deficiencies in the design
or operation of internal control." In particular:
"Executive management of the Company is regularly
involved in the negotiations of complex business
transactions that can have significant accounting
implications to the Company's reported financial
results." Likewise, Interpool "does not have an
individual with sufficient level of understanding of
[certain] accounting rules to be able to properly
evaluate the accounting implications of Swap
Derivatives entered into by the Company." These
"deficiencies" resulted in departures "from US GAAP
that [are] material to the Company's financial
reporting" and had a "material impact."

(Pl. Opp. 32-33) (quoting portions of the KPMG Review).
Plaintiffs then contend that it "belies common sense for
Interpool to now claim that it did not knowingly issue false
financial statements about the company or, at the very least,
acted with reckless disregard for the truth of those statements given that a review substantially less in scope
than the one required by auditing standards nonetheless revealed
material deficiencies." (Pl. Opp. 33) (citing to the complaint).

Plaintiffs further contend that the individual Defendants'
arguments that they did not know about the financial implications
of the transactions they negotiated "is only an admission that
they acted with severe recklessness." (Id. at 34). Plaintiffs
then emphasize the role that each of the individual Defendants
held in the company and the fact that Interpool is not a large
company, and conclude that it therefore "belies common sense for
the Defendants to now argue that they did not know what was
happening at Interpool." (Id. at 34-36).

However, "[i]t is well established that a pleading of scienter
may not rest on a bare inference that a defendant must have had
knowledge of the facts." Advanta, 180 F.3d at 539 (quotations
omitted). See also GSC Partners, 368 F.3d at 239 ("Of course,
it is not enough for plaintiffs to merely allege that defendants
`knew' their statements were fraudulent or that defendants `must
have known' their statements were false."). Furthermore,
allegations of scienter which merely assert that a defendant, by
virtue of his or her position with a corporation "`must have
known' a statement was false or misleading are `precisely the
types of inferences which [courts], on numerous occasions, have
determined to be inadequate to withstand Rule 9(b) scrutiny.'"
Advanta, 180 F.3d at 539 (Quoting Maldonado v. Dominguez,
137 F.3d 1, 10 (1st Cir. 1998)). In short, "[g]eneralized imputations
of knowledge do not suffice, regardless of the defendants'
positions within the company." Id. (Citing Rosenbloom v.
Adams, Scott & Conway, Inc., 552 F.2d 1336, 1338-39 (9th Cir.
1977) ("A director, officer, or even the president of a
corporation often has superior knowledge and information, but
neither the knowledge nor the information necessarily attaches to
those positions.")); see also In re Milestone Scientific Sec. Litig., 103 F. Supp. 2d 425, 470
(D.N.J. 2000) (noting that "allegations that a securities-fraud
defendant, because of his position within the company, must have
known a statement was false or misleading are inadequate to meet
the PSLRA pleading standard").

Here, the Complaint fails to allege any specific circumstances
or events in which the individual Defendants' actions involved
"`not merely simple, or even inexcusable negligence, but an
extreme departure from the standards of ordinary care, and which
presents a danger of misleading buyers or sellers that is either
known to the defendant or it is so obvious that the actor must
have been aware of it.'" Advanta, 180 F.3d at 539 (quoting
McLean v. Alexander, 599 F.2d 1190, 1197 (3d Cir. 1979)). The
basic thrust of Plaintiffs' argument is that Defendants lacked
sufficient internal safeguards and controls to ensure that their
accounting methods complied with GAAP. The KPMG letter did not
opine that Defendants knew that their accounting did not comply
with GAAP, but rather that there were "significant deficiencies
in the design or operation of internal control" and that there
was no "individual with sufficient level of understanding" of
certain accounting rules, resulting in material departures from
GAAP. (See Pl. Opp. 32-33). However, courts generally will not
permit allegations of fraud to stand in which the basis for the
allegation is solely a large financial restatement or accounting
error. See, e.g., In re Alpharma Inc. Sec. Litig.,
372 F.3d 137, 150 (3d Cir. 2004) (citing Kushner v. Beverly Enterprises,
Inc., 317 F.3d 820, 827-28 (8th Cir. 2003) for its holding
that "allegations that defendants `designed and implemented'
improper accounting policies failed to state a claim for
securities fraud in the absence of `allegations of particular
facts demonstrating how the defendants knew of the scheme at the
time they made their statements of compliance, that they knew the financial statements overrepresented the company's true
earnings, or that they were aware of a GAAP violation and
disregarded it. . . . Rote allegations that the defendants
knowingly made false statements of material fact fail to satisfy
the heightened pleading standard of the Reform Act.'"); In re
Carter-Wallace, Inc. Sec. Litig., 150 F.3d 153, 157 (2d Cir.
1998) ("one cannot state a claim for securities fraud merely by
alleging a GAAP violation; the allegation must be accompanied by
a statement of fraudulent intent."); Wilson v. Burnstock,
195 F. Supp. 2d 619, 642 n. 16 (D.N.J. 2002) ("Allegations of GAAP
violations or accounting irregularities, standing alone, are
insufficient to state a securities fraud claim.") (internal
citation omitted); In re SCB Computer Tech., Inc., Sec. Litig.,
149 F. Supp. 2d 334, 353 (W.D. Tenn. 2001) ("the magnitude of the
financial statement, without more, fails to indicate that the
earlier financial statements were made with an intentional or
reckless state of mind at the time they were made.").

Plaintiffs argue that the holdings that

GAAP violations, standing alone, are not actionable . . .
may be true when a GAAP violation is de minimus
or a one-time violation, but repeated violations of
GAAP  in this case, quarter after quarter for a
period of three years and in a number of areas
central to Interpool  must certainly be taken into
consideration in determining whether there is a
strong inference that the defendants intentionally
or recklessly made the misstatements.

(Pl. Opp. 33, n. 26) (emphasis in original). Plaintiffs cite to
P. Schoenfeld Asset Mgmt. LLC v. Cendant Corp.,
142 F. Supp. 2d 589, 608 (D.N.J. 2001) for its holding that "[w]hile it is true
that a violation of GAAP will generally not be sufficient to
establish fraud, when combined with other circumstances
suggesting fraudulent intent, allegations of improper accounting
may support a strong inference of scienter." This Court agrees
that GAAP violations, in conjunction with other evidence of fraudulent intent, may support a strong
inference of scienter. Conversely, evidence of GAAP violations,
without more, cannot support a strong inference of scienter. In
addition, as the P. Schoenfeld court stated, "a restatement of
earnings, without more, does not support a strong inference of
fraud, or for that matter, a weak one." Id. at 612. Plaintiffs
next cite Lewin v. Lipper Convertibles, L.P., 2004 WL 1077930,
at *2 (S.D.N.Y. May 13, 2004) for its statement that "[w]hile
mere allegations of a failure to proceed in accordance with GAAP
and GAAS are not sufficient to allege scienter, here, the
accounting violations alleged are on such a repeated and
pervasive scale that, if proven, they could provide strong
circumstantial evidence of recklessness." (See Pl. Opp. 33-34,
n. 26). That case, however, is factually inapposite from the case
at bar. The Lewin case dealt with an allegation that the
defendant, PriceWaterhouseCoopers, who was the auditor for the
defendant partnership, "recklessly blinded itself to the
[Defendants'] illicit activity, failed to follow general
accounting principles, and improperly gave clean opinions on the
partnership's financial statements." Lewin, 2004 WL 1077930 at
*1. The Court finds it significant that the
PriceWaterhouseCoopers defendant in the Lewin case is an
international accounting and consulting firm. The corporate
Defendants in this case, however, are not alleged to be in the
business of auditing, and in point of fact, the KMPG letter
opined that Interpool "does not have an individual with
sufficient level of understanding of [certain] accounting rules
to be able to properly evaluate the accounting implications of
Swap Derivatives entered into by the Company." (See Pl. Opp.
33). In short then, while the Defendants' alleged GAAP violations
and lack of understanding may provide evidence of corporate
mismanagement, it is well established that "such claims are not
cognizable under federal law." Alpharma, 372 F.3d 151 (citing
Advanta, 180 F.3d at 540; In re Digital Island Sec. Litig., 357 F.3d 322, 332 (3d Cir. 2004)).

Plaintiffs further contend that the individual Defendants were,
at the very least, acting with severe recklessness, given that
each of them signed the annual Form 10-Ks. (Pl. Opp. 36). This is
so, Plaintiffs argue, because the individual Defendants "falsely
represented to the investing public in these SEC filings that the
financial statements were presented in accordance with GAAP."
(Id.). However, as the Third Circuit recognized in the
non-precedential case of In re The Great Atl. & Pac. Tea Co.,
Inc. Sec. Litig., 103 Fed. Appx. 465 (3d Cir. 2004) the fact
that Defendants signed financial disclosures indicating that they
complied with GAAP does not imply that they made misstatements
with scienter. Specifically, the Third Circuit found that "[e]ach
of [defendant's] financial disclosures contained boilerplate
language that the procedures used in the reports conformed with
GAAP. [Plaintiff] points to this language as proof that the GAAP
violations were made with fraudulent intent. Again, however, this
language does not show that [defendant] knew that its procedures
violated GAAP prior to its restatement of earnings in July 2002."
Id. at 470.*fn8

Plaintiffs next allege that Defendants Tuchman and Witteveen
personally guaranteed the debts of PCR, which precluded Interpool
from treating the purported sale of PCR as a discontinued
operation under GAAP. (Pl. Opp. 37) (citing ¶ 36) "Moreover, the
Special Counsel's Report also found that defendant Gordon failed
to disclose to Interpool's auditors numerous instances of the
Company's continuing involvement with PCR, even though the
auditors had instructed him on the accounting rules that applied
to the purported `sale' of PCR". (Pl. Opp. 37) (citing ¶ 36; see also ¶ 112). "This fact alone
establishes that these three Individual Defendants, and the
Company for which they act, knew that the financial statements
were inaccurate when issued." (Id.) (emphasis in original).

The Court notes that this allegation relates solely to a
technical accounting issue regarding how to account for a
subsidiary. Plaintiffs point to language in the Special Counsel's
Report (the "Report") which states that "defendant Gordon failed
to disclose to Interpool's auditors numerous instances of the
Company's continuing involvement with PCR, even though the
auditors had instructed him on the accounting rules that applied
to the purported `sale' of PCR." (Pl. Opp. 37) (citing ¶ 36).
However, as Defendant Gordon points out in his reply brief, the
Report merely states that Mr. Gordon had been "instructed"
regarding certain technical accounting rules. (Gordon Reply 6).
Notably, the report did "not state that he: (a) understood those
rules; (b) deliberately ignored them to distort the accounting
for the PCR transaction; or (c) personally benefitted from PCR's
erroneous treatment as a discontinued operation." (Id.).
Similarly, Plaintiffs have not alleged any facts tending to show
that Defendants Tuchman or Witteveen had any reason to know the
accounting consequences on Interpool's financial statements that
their guarantees would have. (See Tuchman Reply 1; Witteveen
Reply 5). Defendants essentially argue that such a technical
violation under the alleged circumstances is insufficient to
support a finding of "recklessness," and therefore scienter. The
Court agrees. As the Third Circuit defined it in Advanta, a
"reckless statement" for securities fraud purposes is one
"involving not merely simple, or even inexcusable negligence, but
an extreme departure from the standards of ordinary care, and
which presents a danger of misleading buyers or sellers that is
either known to the defendant or is so obvious that the actor
must have been aware of it." Advanta 180 F.3d at 535 (quoting McLean v. Alexander,
599 F. 2d 1190, 1197 (3d Cir. 1979)). In short, it is highly likely that
every day in corporate America corporate finance officers
negligently omit or misstate information concerning technical
accounting issues on which they have in fact received instruction
at some point or other. Indeed, corporate finance officers are
expected, even apart from specific instructions, to be familiar
with pertinent accounting rules and to follow them accordingly.
Nevertheless, the mere fact that an arcane aspect of accounting
and auditing principles has been ignored by that corporate
official, even to an extent constituting "inexcusable negligence"
is insufficient in itself to demonstrate scienter. See
Advanta 180 F.3d at 535. Indeed, courts in this and other
Circuits, when confronted with the issue of whether a GAAP or
GAAS violation demonstrates sufficient scienter to be actionable
as reckless invariably look to see whether or not underlying red
flags are present. See e.g. P. Schoenfeld,
142 F. Supp. 2d at 608 (citing numerous cases where courts focused on "red flags"
to infer fraudulent intent);*fn9 In re MicroStrategy, Inc.
Sec. Litig., 115 F. Supp. 2d 620, 651 (E.D. Va. 2000) ("the magnitude and pervasiveness of MicroStrategy's
financial restatements and the relative simplicity of the
accounting principles violated . . . lend further probative
weight to Plaintiff's allegations that the GAAP violations in
this case raise a strong inference of scienter."). Such is simply
not the case here.

Finally, Plaintiffs allege that the timing of the resignations
of Defendants Witteveen and Gordon gives rise to a strong
inference of their knowledge of the fraud. (Pl. Opp. 37).
Specifically, Plaintiffs allege that:

"On October 10, 2003, Interpool announced that after
a preliminary report by an independent outside law
firm appointed by the Audit Committee of the Board of
Directors to investigate accounting issues, the Board
had accepted the resignation of Raoul Witteveen as
President and Chief Operating Officer and a member of
the Board, effective immediately." ¶ 5; see also ¶¶
9, 88. "On July 18, 2003, Gordon resigned as an
employee and officer of the Company following the
Company's announcement that a Special Counsel had
been appointed by the Company's Audit Committee to
investigate the circumstances surrounding the
Company's restatement of its historical financial
statements." ¶ 18. The same day, the "Company also
announced that the SEC had opened an informal
investigation into the Company's accounting
practices." ¶ 87; see also ¶ 90(b), 123. The most
logical and plausible inference to be drawn from
these "resignations" is that Witteveen and Gordon
were committing accounting fraud and they were
therefore terminated.

(Pl. Opp. 37-38). However, the Third Circuit, and other courts
have found resignations of key officers to be insufficient to
show that they acted with the requisite scienter to commit the
alleged fraud. See, e.g. In re The Great Atl. & Pac. Tea Co.,
Inc. Sec. Litig., 103 Fed. Appx. 465 (3d Cir. 2004) (marked
non-precedential) (declining to find that the allegation that
nine employees were fired as a result of accounting
irregularities supported a strong inference of
scienter);*fn10 Abrams v. Baker Hughes Inc., 292 F.3d 424,
434 (5th Cir. 2002) (finding that resignations, without additional evidence that accounting
irregularities were the reason for the resignations, do not have
"any scienter implications"). Furthermore, this Court is
satisfied that even if Defendants Witteveen and Gordon were in
fact terminated due to the improper accounting in the financial
statements, this does not show that they acted with scienter.
Indeed, a corporation may choose to terminate employees for
making errors due to negligence, oversights, etc., or simply for
incompetence. This Court, however, may not infer scienter unless
it is satisfied that the Defendants acted with reckless or
conscious behavior.

The Court also recognizes that by Plaintiffs' own admission,
Interpool's restatement of their historical financial statements
did not uniformly result in a decrease to Interpool's reported
income or assets. Some of the restated figures in fact resulted
in an increase to reported income, or an increase to income in
one year, and a decrease to income in another. (See, e.g. Pl.
Opp. 16 ("net income was materially understated by $.2 million
for the year ended December 31, 2000.") (emphasis added)). The
Court finds that this tends to negate an inference that
Defendants acted with intent to perpetrate a fraud on investors
via false and misleading financial statements.

In sum, "[l]ooked at as a whole, plaintiffs' allegations rest
on nothing more than a series of inferences . . . too tenuous to
amount to one of those highly unreasonable omissions or
misrepresentations that involve not merely simple or even
excusable negligence, but an extreme departure from the standards
of ordinary care." Alpharma, 372 F.3d 151 (internal citation
omitted). Thus, the Court concludes that Plaintiffs have failed
to state a Rule 10b-5 claim premised on conscious or reckless
conduct. Therefore, because Plaintiffs have failed to properly
plead motive and opportunity, or alternatively, evidence of
conscious or reckless behavior, their complaint must be dismissed for failure to plead a strong
inference of scienter.

Because the consolidated amended class action complaint has
failed to plead successfully a predicate violation of Section
10(b), Rule 10b-5, or Section 11 of the Exchange Act, Plaintiffs'
Section 20(a) claims against Defendants Witteveen, Gordon,
Geoghan, and Tuchman as "controlling persons" of Interpool must
be dismissed.

C. Leave to Amend: Leave to amend a complaint under Rule 15 will be denied where,
as here, amendment would be futile. See, Forman v. Davis,
371 U.S. 178, 182 (1962). Courts in this Circuit dismiss complaints
with prejudice under the PSLRA where plaintiffs request leave to
amend while opposing a motion to dismiss but offer no
representation as to new information or amendments that would
cure the defects in the pleading. GSC Partners, 368 F.3d at 246
(affirming dismissal with prejudice where plaintiffs "offered no
additional facts that would cure their amended complaint."). As
the Third Circuit reasoned, the purpose of the PSLRA is "to
provide a filter at the earliest stage (the pleading stage) to
screen out lawsuits that have no factual basis." Id. (internal
citations omitted). Liberally granting plaintiffs leave to amend,
especially where they have not suggested that they have developed
new facts or how they would cure defects in the pleadings, would
frustrate that purpose. Id.

Had this Court concluded that dismissal was appropriate due to
a technical or correctable failure in Plaintiffs' pleadings, it
may have been appropriate to grant Plaintiffs leave to amend
their complaint. However, Plaintiffs request leave to amend in a
footnote wherein they fail to explain the basis for this request
or offer how they would cure the defects if they were to amend
their complaint. (Pl. Opp. 66 n. 40). Furthermore, having
reviewed all of the pleadings thus far, the Court is satisfied
that Plaintiffs would be unable to amend their complaint in such
a way as to plead a strong inference of scienter. Under these
circumstances, the Court finds it appropriate to dismiss the
complaint with prejudice.

CONCLUSION:

For the foregoing reasons, Defendants' motions to dismiss the
consolidated amended class action complaint will be GRANTED WITH PREJUDICE.*fn11
The Court will enter an appropriate Order.

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